Dispute Resolution in a Corona Virus Paradigm – Is a New Normal of Early Bilateral Negotiation Emerging?

Dispute Resolution in a Corona Virus Paradigm – Is a New Normal of Early Bilateral Negotiation Emerging?

27 May 2020

By Honorary Consul Kim Lovegrove MSE RML FAIB, Senior Lawyer, Lovegrove & Cotton – Construction and Planning Lawyers

The writer has been apprised of the emergence of a changing dispute resolution paradigm that has coincided with the onset of Coronavirus and the ‘choppy’ economic conditions. As the money supply is ebbing, some cohorts in the legal fraternity have reported that disputants have become very anxious to facilitate early settlement of contentious matters.

The writer has also observed the emergence of what may turn out to be a new normal where potential litigants are displaying a higher level of reluctance to initiate legal proceedings in the contentious arena.

One lawyer said to the writer that three different cases where mediations were set down for August and September 2020, the disputants instructed their lawyers to accelerate settlement dialogue through bilateral negotiations via phone and email, rather than wait for the Tribunal designated mediations. The upshot was that the mediations were cancelled as earlier negotiated settlements were achieved.

If this anecdotal information is indicative of that which is gaining momentum on a wider front, then it could well impact upon dispute resolution practices. Ironically, there might be a ‘groundhog day’ effect where some members of the legal fraternity choose to adopt dispute resolution methods that were more reminiscent of the late 1980s; an era that pre-dated the institutionalisation of mediation as a critical and very necessary part of the dispute resolution theatres.

As the writer has been a dispute resolution lawyer for nigh on three decades, this piece will provide an experienced based historical synopsis on the metamorphosis of dispute resolution (in particular in the construction dispute resolution setting) within the antipodean setting over the last three decades.

The Pre-Mediation Paradigm

The writer commenced practice in 1986 in Victoria, Australia; initially as a workers compensation lawyer and then at the Master Builders Association of Victoria as a Legal and Contracts Officer prior to joining private practice as a construction lawyer. At that time, the overwhelming majority of building disputes were residential, the majority of which were resolved by arbitration.

Ninety percent of the building contracts that parties executed (whether residential, commercial or civil) contained arbitration clauses. In the event of a dispute, the parties were compelled pursuant to the contracts to refer the matter to arbitration. The arbitration nominating bodies appointed an arbitrator who would then organise a directions hearing whereupon an interlocutory set of procedures and a timetable reminiscent of the Court system would be set down.

In the case of workers compensation claims, most matters were settled prior to trial often ‘at the Eve of Court’. A preliminary conference was held where the registrar provided a couple of rooms for legal representatives to negotiate and attempt to cut a deal. In most instances, the solicitors and/or their barristers successfully negotiated settlement through bilateral negotiations, absent the involvement of any third party conciliator.

In the arbitration setting, the arbitrators neither participated in, nor facilitated mediations as this was not part of their remit. Furthermore, participation in mediation may have conflicted them from ultimately arbitrating the matter.

The net effect was that without the imposition of any mandated mediation, for parties that were intent on settling their affairs, it behoved their legal representatives to negotiate and settle the client’s disputes independently and bilaterally and failing same the matters went to hearing.

It followed that without the court or tribunal augmented compulsory resort to mediation, a culture existed where lawyers had no option but to negotiate with one another to avoid trial if the resolve to take a matter to trial waned. The writer also recalls a time where a larger percentage of cases settled at the very early gestation of a dispute than was the case over the last decade or so. The writer, to reiterate, surmises that this ‘old normal’ may enjoy a renaissance of sorts where cases are settled at a much earlier stage of the dispute resolution critical path than has been the case for a good many years – but for different reasons.

The Mediation Era – Alternative Dispute Resolution

By the mid-90s, there was a momentous shift to ensure that mediation became a paramount element of the antipodean dispute resolution fabric. Courts and tribunals incrementally yet deliberately fashioned a new dispute resolution apparatus where those who presided over the dispute resolution theatres insisted that the disputants attend compulsory mediation; so one was forced to mediate.

By way of example, for many years now, the Building and Property list of the Victorian Civil and Administrative Tribunal (‘VCAT’) has had mechanisms to ensure that all disputants attend a compulsory mediation where the tribunal provides a mediator to spend typically the better part of a day assisting the parties to resolve their disputes and different points of view. The VCAT does not visit the costs of the deployment of the mediator upon the parties. Many of the Courts on the other hand likewise compel the parties to attend mediation but typically the disputants must bear the costs of the mediator’s deployment on a 50/50 basis.

Another development in the residential building dispute resolution setting in Victoria occurred in the 90s with the promulgation of the Domestic Building Contracts Act 1995 that ‘expelled’ arbitration clauses in residential building contracts. This resulted in a migration of residential dispute resolution from arbitration to the apposite jurisdiction, being the VCAT. Commercial disputants however had no legislated arbitration embargo visited upon them, so the parties were and are at liberty to execute contracts that rely upon arbitration as the dispute resolution mechanism.

By the beginning of the third millennium, a dispute resolution ecology had thus emerged where mediation become a far more powerful dispute resolution mechanism, particularly in the theatre of residential dispute resolution.

Coinciding with this paradigm shift was the demise of bilateral advocacy negotiation. Whereas in the 80s, solicitors tended to be more prone to resolving a dispute before it gained momentum, with the introduction of mandatory mediation, negotiations generally occurred many months down the track at the mediation juncture. Typically by the time a case went to mediation, the statement of claim, statement of defence and counterclaim had been filed and the interlocutory process was at a fairly mature stage. But also coinciding with this was the emergence of a culture where many solicitors did not engage in bilateral negotiations knowing full well that the opportunity to negotiate would invariably present itself at the mediation juncture. So the mediator became a very prominent actor in the dispute resolution context and much greater reliance was placed upon this actor to effectively facilitate a settlement and ‘close out’ the dispute.’

Coronavirus and the Emergence of a Possible New Normal Dispute Resolution Paradigm

With the post-April 2020 surge of unemployment and with the contraction in many industries, not the least of which being the building industry, work in progress and money supply is diminishing. As a result, the ability of potential disputants to either embark upon or maintain involvement in contentious dispute resolution settings is far more constrained. Furthermore, the fiscal constraints that have been visited upon both consumer and industry are such that the traditional hinterland of disputants that are able to afford both the time and the costs of contentious dispute resolution is shrinking.

It is thus not surprising, for fear of labouring the point,  that the writer is hearing of much more early-onset battle fatigue, an increasing nervousness about the initiation of legal proceedings and, consistent with this, much more pressure being brought to bear upon advocates to resolve disputes by way of front end bilateral negotiation, reminiscent of the late 80s.

Not surprisingly, however, the writer has been informed of a surge in security for payment adjudications as a feature of this form of dispute resolution is the accelerated or compressed timetable.

Mediation, notwithstanding its compellingly useful conflict containment virtues, tends to occur when the dispute is well advanced, at a time when many months may have passed since the initiation of legal proceedings along with significant sums of money having been spent. As the coronavirus new normal is a recessionary and potentially economically depressive malaise, there will be far less funds available within the community to embark upon protracted legal proceedings; they simply will not be affordable for a significant percentage of the population and the business community. This could well impact upon the volume of matters that progress to mediation.

Admittedly, there are some conciliation or mediation dispute resolution mechanisms that do exist, such as the Domestic Building Disputes Resolution Victoria (‘DBDRV), that by force of law compel the parties to mediate before legal proceedings can be initiated in the tribunal, but these legislative front-end dispute resolution mechanisms tend not to be the norm.

Some lawyers may need to re-engineer their dispute resolution modus operandi and ‘amp up’ their negotiation skills. This will in part require a more collaborative approach to the resolution of building disputes and disputation at large. There will need to be much greater use of the phone and soft-skill negotiation techniques. A more collegiate dispute resolution disposition could well find fertile ground in the emerging setting which brings to mind Winston Churchill’s euphemism ‘to jaw-jaw is better than to war-war’.

Lovegrove & Cotton Lawyers to the building industry

For thirty years, Lovegrove & Cotton have represented builders, building surveyors and building practitioners in Melbourne, Canberra, Sydney and Queensland. Justin Cotton is a leading Australian construction lawyer and widely respected in the building fraternity as evidenced by his appointment as Chairperson of the HIA Industrial Relations and Legal Services Committee, and member of the Regional Executive Committee, for HIA Victorian Chapter. Likewise, Doyles Guide ranks Kim Lovegrove as one of the leading construction lawyers in Australia. Lovegrove & Cotton can help practitioners resolve any type of building dispute and are preeminent in the area of building practitioner advocacy. If you wish to engage the firm, feel free to contact us via our website or by emailing enquiries@lclawyers.com.au.